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Where Does SAP Stand in the Global Software Space?



SAP’s scale in the software space

Previously in this series, we discussed market expectations for SAP’s (SAP) upcoming fiscal 2Q16 results. We also discussed factors such as SAP’s growth in the cloud space as well as new offerings that will determine the success of the company’s future in the software space. Now, let’s look at where the company’s value proposition stands in the global software space, starting with SAP’s size.

As of July 12, 2016, Microsoft (MSFT) was the largest player by market capitalization in the software space. MSFT was followed by Oracle (ORCL), IBM (IBM), SAP, and Salesforce (CRM).
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SAP’s enterprise value multiple and dividend yield

SAP was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~11.23x on July 12, 2016. This was higher than Microsoft’s ~9.9x, IBM’s ~8.78x, and Oracle’s 8.64x.

SAP’s forward annual dividend yield was ~1.67% as of July 12, 2016. Microsoft’s, Oracle’s, and IBM’s forward annual dividend yields were ~2.7%, ~1.5% and ~3.57%, respectively, as of July 12. Salesforce doesn’t pay a dividend.

For diversified exposure to select software companies in the US, you might consider investing in the SPDR S&P 500 ETF (SPY), which has 8% exposure to the application software industry.


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